Verra Mobility Q2 Earnings Call Highlights

Verra Mobility NASDAQ: VRRM reported second-quarter results that exceeded its internal expectations, supported by New York City camera-installation timing, operational improvements and stronger collections in its Commercial Services segment. However, the company lowered its full-year outlook after renewing major rental-car customer agreements on terms that Chief Financial Officer Craig Conti said were materially less favorable than prior contracts.

The company announced a new seven-year tolling and violation-services agreement with Avis Budget Group and a new five-year agreement with Hertz. The Avis agreement follows a termination notice received in May, while the Hertz renewal was completed ahead of its expected 2027 renegotiation period.

“Together, the ABG and Hertz agreements represent meaningful progress towards stabilizing our Commercial Services customer base,” Interim Chief Executive Officer Jon Keyser said. He said the agreements reflect the company’s technology, integrations, operating scale and efforts to establish more flexible, customer-focused partnerships.

Second-Quarter Performance

Government Solutions service revenue increased 17% year over year in the second quarter, driven by New York City camera installations and 8% service-revenue growth outside New York City. Within New York City, service revenue rose 36% from a year earlier as incremental camera installations exceeded the impact of revised contract pricing, Conti said.

Verra Mobility had experienced weather-related delays in New York City installations during the first quarter, but Conti said the company caught up during the second quarter and returned to its anticipated installation level by the end of the first half.

Commercial Services revenue rose 6% year over year, including a 5% increase in rental-car tolling revenue and 3% growth in fleet-management revenue. Rental-car tolling growth was driven by product adoption and tolling activity despite a 1% decline in U.S. travel volume compared with the prior-year quarter. Commercial Services profit margin expanded 100 basis points, aided by operating leverage and lower bad-debt expense from improved collections.

Parking Solutions generated $20 million in revenue and roughly $2 million in segment profit. SaaS and services sales rose approximately 1%, while product revenue was effectively flat. Segment margins declined 465 basis points year over year because of product-sales mix and the timing of operating expenses.

• Consolidated adjusted EBITDA was $111 million.
• GAAP net loss was $48 million, reflecting a $104 million non-cash goodwill and intangible-asset impairment charge related to T2 Systems.
• GAAP diluted loss per share was $0.32, compared with income of $0.24 per share a year earlier.
• Adjusted EPS was $0.38, compared with $0.34 in the second quarter of 2025.
• Operating cash flow was $56 million, while free cash flow totaled approximately $33 million.

Government Solutions recorded $25 million in new annual recurring revenue and contract awards during the quarter, including work-zone speed and school-bus stop-arm programs. Over the trailing 12 months, new incremental annual recurring revenue bookings totaled about $74 million.

California Expansion and Safety Programs

Keyser said Verra Mobility was selected as the automated speed-safety vendor for Los Angeles and is negotiating the final contract. He said the company expects approximately $10 million in annual recurring revenue from the agreement once finalized.

California Assembly Bill 645 authorized speed-enforcement pilots in six cities. Keyser said Verra Mobility has been selected as technology partner by all six cities authorized under the legislation.

The company also cited safety outcomes from existing programs, including a 28% reduction in red-light violations within the first 60 days of San José’s program and a nearly 50% decline in traffic fatalities in Merced.

Guidance Reduced After Rental-Car Renewals

Conti said the Avis Budget and Hertz agreements provide longer contractual visibility but carry lower pricing than the prior arrangements and permit customers to modulate fleet volumes. The new commercial terms took effect immediately.

Verra Mobility now expects 2026 total revenue of $945 million to $965 million and adjusted EBITDA of $360 million to $370 million, implying an adjusted EBITDA margin of about 38%. The company forecast adjusted EPS of $1.11 to $1.17 and free cash flow of $105 million to $115 million.

The free-cash-flow outlook includes higher capital spending than previously anticipated, primarily for Government Solutions implementation work tied to the accelerated Los Angeles Metro contract award and school-bus stop-arm awards. The company also expects a $30 million working-capital use, largely related to rental-car contract renewals and the timing of New York City installation expenditures and collections.

Commercial Services revenue is now expected to decline in the negative high-single-digit range for the full year compared with 2025, as growth decelerates in the third and fourth quarters. The company expects full-year Commercial Services segment margins in the low 60% range.

Government Solutions is expected to produce total revenue growth at the high end of the mid-single-digit range for 2026. The company continues to expect segment profit margins to contract by roughly 450 to 500 basis points from 2025, largely due to New York City pricing adjustments and subcontractor requirements. Parking Solutions revenue is projected to rise low to mid-single digits, with margins slightly accretive to 2025.

Cost Actions and Operating Changes

Keyser said Verra Mobility has reorganized its customer-facing operations, appointing Stacey Moser as chief customer officer and unifying sales, account management and marketing leadership across its major commercial and government businesses.

The company is also pursuing approximately $20 million in annualized cost reductions, with full run-rate savings expected beginning in 2027. Conti said the principal headcount actions have been completed, while the company continues to examine non-labor spending, procurement, third-party costs, roadside customer service and operational processes.

Verra Mobility ended the quarter with approximately $1 billion in net debt and net leverage of 2.4 times. Its credit revolver was fully repaid and undrawn at quarter-end. The company had $66 million remaining under its $250 million share-repurchase authorization, though Conti said the current priority is strengthening the balance sheet and building cash reserves.

Management is also evaluating whether its evolving organizational structure could result in changes to operating and reportable segments, potentially including reporting as a single operating and reportable segment. No reporting changes were made for the second quarter.

About Verra Mobility (NASDAQ:VRRM)

Verra Mobility, traded on the Nasdaq under the ticker VRRM, is a leading provider of smart mobility solutions designed to improve safety, efficiency and compliance for transportation authorities and commercial fleets. The company develops and operates automated traffic enforcement systems, toll and violation management platforms, and connected-vehicle services. Through its technology offerings, Verra Mobility helps public agencies enhance road safety, reduce congestion and streamline revenue collection for tolling and parking.

Verra Mobility’s core products include red-light and speed-camera enforcement programs, license plate recognition systems, and cloud-based violation processing software.

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